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1 – 10 of over 2000
Article
Publication date: 1 January 2012

Ibrahim El‐Sayed Ebaid

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the…

2017

Abstract

Purpose

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the emerging capital market of Egypt.

Design/methodology/approach

The regression models are estimated using OLS to investigate the relative and incremental value relevance of accounting‐based performance measures. The relative value relevance tests are used to examine which performance measures better explain stock returns. The study also uses the incremental value relevance tests to examine whether one of these measures provides value‐relevance data beyond that provided by another.

Findings

The results of the empirical tests indicate that relative and incremental value relevance tend to increase when moving down in the income statement, with net income having the largest relative and incremental value relevance while total sales have the lowest relative and incremental value relevance. Also, all of the accrual‐based performance measures have relative and incremental value relevance statistically higher than that of operating cash flows.

Research limitations/implications

The results highlight the importance of accounting‐based performance measures in Egypt. The results shed light on the fixation on net income that is bottom line performance measure in the income statement where net income has the highest value relevance to Egyptian capital market. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.

Originality/value

This study presents extended research on the usefulness of accounting‐based metrics as proxies for firms' performance in Egypt as one of emerging markets.

Details

Management Research Review, vol. 35 no. 1
Type: Research Article
ISSN: 2040-8269

Keywords

Book part
Publication date: 1 January 2012

Ioannis C. Thanos and Vassilis M. Papadakis

The main aim of this chapter is to review the use of accounting-based measures of merger and acquisition (M&A) performance. To do so, we conducted a keyword search in 28 leading…

Abstract

The main aim of this chapter is to review the use of accounting-based measures of merger and acquisition (M&A) performance. To do so, we conducted a keyword search in 28 leading management journals and one edited book (i.e., Advances in Mergers & Acquisitions). To complement our review, we draw on very recent literature reviews of M&As (e.g., Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35(3), 469–502; Kolev, Haleblian, & McNamara, 2012; Meglio, 2009). Results indicate that accounting-based measures of performance have been used in 36 studies. Also, in these studies, there exists much heterogeneity with respect to the operationalization of M&A performance, the time lag, and the level of analysis. Next, the chapter proceeds with the discussion of the advantages and disadvantages of accounting measures and the proposition of four substantive priorities for future research in the area.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78052-196-1

Article
Publication date: 17 June 2020

Harnesh Makhija and Pankaj Trivedi

The paper aims to find out the information content of performance measures from accounting and value-based measures that best explain the total shareholder return.

Abstract

Purpose

The paper aims to find out the information content of performance measures from accounting and value-based measures that best explain the total shareholder return.

Design/ methodology/ approach

To achieve this aim, static and dynamic panel data regression analysis is applied to the sample of 56 Indian companies taken from the Nifty Midcap 100 Index, between 2012 and 2019.

Findings

It is found that accounting-based measures have more relative information content in predicting total shareholder return as compared to value-based measures. Economic value added (EVA) and cash value added (CVA) do not add to the information content provided by accounting-based measures. A combination of accounting-based measures and value-added intellectual coefficient (VAIC) adds marginally to the information content provided by accounting-based measures in explaining the total shareholder return. Dynamic panel regression analysis shows that return on assets (ROA), return on capital employed (ROCE), return on equity (ROE) and EVA have a significant impact on total shareholder return.

Originality/value

In this study, along with EVA, other measures from value-based measures, i.e. CVA are empirically tested to explain the total shareholder return. Intellectual capital efficiency computed by VAIC is also empirically tested along with accounting-based measures, EVA, CVA and market value added (MVA). To bring robustness to findings, data are tested by using dynamic panel regression analysis.

Details

International Journal of Productivity and Performance Management, vol. 70 no. 5
Type: Research Article
ISSN: 1741-0401

Keywords

Book part
Publication date: 19 September 2014

Johannes M. Drees

Extant research posits that mergers and acquisition (M&As) do not create value. Still many firms adopt expansion strategies such as alliances, joint ventures (JVs), and M&As to…

Abstract

Extant research posits that mergers and acquisition (M&As) do not create value. Still many firms adopt expansion strategies such as alliances, joint ventures (JVs), and M&As to grow and enhance their performance. Through performing a meta-analysis on 204 papers that assess the relationship between the three most prevalent expansion strategies formed by firms, alliances, JVs, and M&As and their different substantive and symbolic performance effects, this study contributes in two ways. First, it becomes clear that alliances and M&As enhance a firm’s substantive performance, while no positive performance effect is observed for JVs. In turn, all three expansion strategies boost a firm’s symbolic performance in terms of its legitimacy and status. Second, a distinction between their effects on a firm’s substantive performance in terms of their market-based and accounting-based performance shows that alliances and M&As both positively contribute to a firm’s accounting-based performance, while only the former spurs a firm’s market-based returns. This indicates that M&As have more long-term accounting-based performance effects compared to alliances and JVs, which suggests that in the long-term firms do best by expanding through M&As.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78350-970-6

Keywords

Article
Publication date: 8 February 2018

Allam Hamdan

This study sheds light on the relation between intellectual capital and firm performance. The study argues that traditional performance measurement based on accounting is still…

2599

Abstract

Purpose

This study sheds light on the relation between intellectual capital and firm performance. The study argues that traditional performance measurement based on accounting is still able to explore the relation between intellectual capital and performance.

Design/methodology/approach

The study was conducted at 198 firms from two Gulf Cooperation Council countries: Kingdom of Saudi Arabia and Kingdom of Bahrain for the period 2014–2016. To measure intellectual capital, the value added intellectual coefficient model was adopted along with two measures of performance: accounting-based performance which is return on assets and market-based performance which is Tobin’s Q, in addition to the Random-Effects Regression.

Findings

Study findings came up with evidences that support the relationship between intellectual capital and accounting-based performance, but negates any relation between intellectual capital and market-based performance. The findings also revealed different results, between Saudi Arabia’s and those of Bahrain.

Originality/value

The study contributes to the debate on the validity of relating intellectual capital to the traditional accounting-based performance.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 11 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 1 September 1994

Barbara J. Askren, James W. Bannister and Ellen L. Pavlik

Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982; Larcker…

Abstract

Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982; Larcker, 1983). Following conflicting empirical evidence related to the stock market reaction associated with the adoption of accounting‐based long‐run performance plans, this study seeks to gain further insight into the effect of such plans on accounting income‐based and value added‐based measures of productivity and return. The results indicate that firms adopting accounting‐based performance plans do not experience any greater gains in accounting return or productivity measures than do a set of control firms. Thus, such plans may not have the intended effect. Because performance plans are a popular method of executive incentive compensation, further research on the impact of these plans is indicated.

Details

Managerial Finance, vol. 20 no. 9
Type: Research Article
ISSN: 0307-4358

Open Access
Article
Publication date: 29 September 2022

Jasvir S. Sura, Rajender Panchal and Anju Lather

The main aim of this paper is to examine the claim that economic value added (EVA) advocates its superiority over the traditional accounting-based financial performance measures…

2874

Abstract

Purpose

The main aim of this paper is to examine the claim that economic value added (EVA) advocates its superiority over the traditional accounting-based financial performance measures, i.e. profit after tax (PAT), earnings per share (EPS), return on assets (ROA), return on equity (ROE) and return on investment (ROI) in the Indian manufacturing sector and at the same time, give empirical facts. It also tests and examines the information content of various performance measures and their relationship with stock returns.

Design/methodology/approach

The paper uses the sample of 534 Indian manufacturing companies from the Bombay Stock Exchange (BSE) during the period 2000–2018. Multiple regression models are applied to examine the information content of EVA and traditional performance measures in explaining shareholders’ returns.

Findings

Relative information content tests revealed that traditional accounting-based measures such as EPS, ROE and ROA performed better than EVA in explaining the returns of Indian manufacturing companies. Incremental information content of EVA adds little contribution to information content above traditional performance measures. The claim of superiority of EVA over accounting-based measures in association with shareholder returns is proved invalid in Indian manufacturing companies.

Originality/value

This study concludes that EVA has no superiority over traditional accounting-based financial performance measures in explaining stock returns of Indian manufacturing companies. To achieve heftiness in outcomes, panel data are tested by using Breusch–Pagan–Godfrey (BPG) test for heteroskedasticity, Hausman’s test for fixed and random effect, variance inflation factor (VIF) test for multicollinearity and Durbin–Watson test for autocorrelation.

Article
Publication date: 13 April 2015

John Robinson

Performance-based executive compensation has been well studied in the academic literature but relatively little attention has been paid to the performance metrics disclosed by…

309

Abstract

Purpose

Performance-based executive compensation has been well studied in the academic literature but relatively little attention has been paid to the performance metrics disclosed by corporations in their proxy statements. The paper aims to discuss this issue.

Design/methodology/approach

Using these statements from a large sample of US firms from 1996 to 2005, the author constructs an accounting-based-metric index based on the inclusion or exclusion of performance benchmarks from five categories.

Findings

The author finds firm rely more heavily on accounting-based evaluation when their stock market valuation is low. Larger firms, firms with a high marginal tax rate, and firms with low earnings per share are more likely to use accounting-based pay, levered firms are not more or less likely.

Originality/value

These results are consistent with accounting-based pay being used by firms with fewer intangible assets, smaller unrealized growth options, and more established lines of business.

Details

Managerial Finance, vol. 41 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 March 2003

Eunsup “Daniel” Shim and Jooh Lee

This paper attempts to examine a canonical (simultaneous) relationship between service industry CEOs' compensation and corporate performance with respect to accounting‐based and…

Abstract

This paper attempts to examine a canonical (simultaneous) relationship between service industry CEOs' compensation and corporate performance with respect to accounting‐based and market‐based performance measures. In addition, this study examines the effect of firm size on compensation. The results of this study suggest that executive compensation depends simultaneously on both market‐based and accounting‐based performance measures. EPS, ROA, ROE and Market Rate of Return are positively associated with both cash compensation and long‐term compensation. Firm size is also positively related to the long‐term compensation.

Details

Review of Accounting and Finance, vol. 2 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 31 May 2013

Mostafa Kamal Hassan and Sawsan Saadi Halbouni

The purpose of this paper is to investigate the effect of corporate governance mechanisms on the financial performance of the United Arab Emirates (UAE) listed firms.

3300

Abstract

Purpose

The purpose of this paper is to investigate the effect of corporate governance mechanisms on the financial performance of the United Arab Emirates (UAE) listed firms.

Design/methodology/approach

Relying on a sample of 95 UAE listed firms affiliated to financial and non‐financial sectors, the paper performs a cross‐section regression analysis to test whether there is a significant relationship between governance mechanisms (voluntary disclosure, CEO duality, board size, board committee and audit type) and UAE firms' performance while controlling for firm size, industry type, firm listing years and leverage. The paper relies on data published on year 2008 and utilizes the accounting‐based measures of Return on Assets (ROA), Return on Equity (ROE) as well as the market measure (Tobin's Q) in order to measure the UAE firms' financial performance.

Findings

The empirical results show that voluntary disclosure, CEO duality and board size are significantly influencing the UAE accounting‐based performance measure, while none of the governance variables significantly affects firms' market performance measure. The results also reveal that firm size is the only control variable that significantly influences firms' performance. This paper provides evidence showing that the accounting‐based performance measures are more objective in the years where unstable economic conditions exist.

Practical implications

The paper's findings indicate that the underlying principles of corporate governance are applicable in emerging markets. The findings are important to regulators, investors, managers, and researchers aiming at developing new policies that establish better regulatory infrastructure that increases investors' confidence and attracting foreign investment.

Originality/value

The paper is one of very few studies that examine the relationship between corporate governance and firms' financial performance under economic turbulent in an emerging market economy, the UAE.

1 – 10 of over 2000